Mervyns to start liquidation sales Friday

Retailer's offering starts today after settlement with creditors

Published 4:00 am, Friday, October 31, 2008

Photo: Michael Macor, The Chronicle

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Liquidation sales will start today (Friday, Oct. 31) at Mervyns, the 59-year-old department store chain based in Hayward that announced earlier this month it would go out of business. San Francisco resident Brian Lee shopping at the Mervyn's Department store on the corner of Masonic and Geary Streets on Friday Oct. 17, 2008, learned today of the store's closing. The ailing department store, which filed for Chapter 11 bankruptcy protection in July, announced today that it plans to liquidate all of its stores. Lee says he has shopped the Mervyn's San Francisco store for the past 5 years. less

Liquidation sales will start today (Friday, Oct. 31) at Mervyns, the 59-year-old department store chain based in Hayward that announced earlier this month it would go out of business. San Francisco resident ... more

Photo: Michael Macor, The Chronicle

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Mervyns, the 59-year-old department store chain headquartered in Hayward and catering to mid-tier customers, filed for bankruptcy protection Tuesday, the most recent retailer to be damaged in a brutal economy.MERVYNSXX_1041.JPGWhen Mervyns got bought out by a group of private investors in 2004, it closed a number of unprofitable stores. Today it's opening new ones and remolding it's older profitable locations like it's Pleasant Hill store at Sun Valley Mall. With 125 stores in Ca, Nv, Tx, Az and Utah stores are getting new touch screen registers, lighting, flooring and furniture and displays. NOVEMBER 30, 2006PLEASANT HILL.By Lance Iversen/San Francisco Chronicle less

Mervyns, the 59-year-old department store chain headquartered in Hayward and catering to mid-tier customers, filed for bankruptcy protection Tuesday, the most recent retailer to be damaged in a brutal ... more

Photo: Lance Iversen, The Chronicle 2006

Mervyns to start liquidation sales Friday

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Liquidation sales start Friday at Mervyns, the 59-year-old department store chain based in Hayward that announced this month it will go out of business.

In a federal bankruptcy court in Delaware on Thursday, attorneys representing the retailer and its creditors resolved some legal issues that permitted Mervyns to go ahead with sales to close its remaining 149 stores.

Mervyns had filed for Chapter 11 in July, hoping to close just 26 stores, but resorted to total liquidation after turnaround efforts failed.

Last week, a committee representing Mervyns' creditors objected to the company's liquidation sales and filed a motion to convert the retailer's bankruptcy filing from Chapter 11 to Chapter 7, which would have put a court-appointed trustee in charge of liquidating the assets.

Under the settlement reached Thursday, Mervyns will retain its Chapter 11 filing status.

"The primary basis to our objection was we had not seen a budget that provided sufficient funds to allow a proper wind-down in Chapter 11," said Jay Indyke, partner with Cooley Godward Kronish, a law firm representing the creditors. He said the settlement ensured Mervyns set aside enough funds to deal with pending litigation, including a lawsuit Mervyns filed in September against its former owners.

Indyke said he was concerned that Mervyns' money would have all gone to secured creditors, which include Wachovia Capital Finance Corp., if the company had been allowed to liquidate without a budget. That would have left little for the company's unsecured creditors, vendors and suppliers.

Mervyns owes Levi Strauss & Co. more than $12.8 million, making the San Francisco jeansmaker the company's largest unsecured creditor. Other major creditors include Nike USA Inc., Vans Inc. and Hanesbrands Inc.

James Schaye, president and chief executive of Hudson Capital Partners, said his company and Mervyns' sales associates will be ready to start the sales today, despite short notice. "There are a lot of things that have to take place between this afternoon at 5 p.m. and 10 a.m. tomorrow when the stores open," Schaye said shortly after Thursday's hearing.

Mervyns' employees will also be paid for accrued vacation time, provided the company meets its performance goals. The creditors' attorneys had objected to the company paying employees nearly $2 million, in advance of other creditors, without the issue being hammered out in court.

Mervyns, which had vowed to fight for the vacation pay, welcomed Thursday's developments.

"We are pleased that today's decision will allow for the continued employment of many Mervyns employees through the holiday season," the company said in a statement. "In addition, we now expect that if we meet our performance objectives we will be able to pay our associates their accrued vacation compensation."

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